DEBT SOLUTIONS
Bankruptcy
Frequently Asked Questions
Typically, bankruptcy lasts for 12 months from the date the court made you bankrupt; however, this can be extended if you don’t comply with the terms of your bankruptcy. Your circumstances may also require you to contribute monthly payments for up to two years after you are discharged.
If you fail to comply with the terms of a payment agreement, a creditor can petition for bankruptcy. If you receive a call or letter informing you that a creditor intends to do this, you should seek professional advice straight away.
If you’re unable to repay your debts, you have the option of beginning bankruptcy proceedings. You can apply via an online application to an adjudicator.
Although you will unlikely be able to maintain an existing bank account after bankruptcy, many banks will provide a basic account service that allows you to deposit and withdraw cash. In some cases, if you have a joint account and one of the account holders has been declared bankrupt, the bank may insist on that account being closed and both of you opening a new account.
This depends on a number of different factors, including if your property has any equity in it. If the house is worth a considerable amount more than when you first purchased it, you may have to sell it to release money for creditors. There are potentially other ways to realise the value which may not require an outright sale. You should seek expert advice on your own situation.
Although your assets must be sold to pay your bankruptcy debts, you are usually allowed to keep items you need for work such as tools or a vehicle (depending on the value of the vehicle, you may have to sell it for a cheaper model). You are entitled to keep personal items such as clothing, bedding and furniture. However, if you have valuable jewellery, antiques, art or other vehicles, these will be considered as assets which can be sold.
Bankruptcy has a serious effect on your credit rating as it stays on your credit file for six years. You may need to make sure that records of the main UK credit reference agencies are updated once you’re discharged so you can regain access to credit. It can be difficult to secure a mortgage or other loan after a bankruptcy.
It depends on your job or profession and terms of employment. In many cases you can continue working as normal. However, there are certain employers and professions that place restrictions on the employment of people who are in bankruptcy. These include the legal and accounting professions as well as the police, armed forces and members of parliament.
Your name will be included on a register held by the Insolvency Service, which is publicly available. However, only limited details are shown and someone would have to actively search for you by name to find any information. In the past, newspapers published details of bankruptcies but this is a rare occurrence now.
You should talk to your trustee about your particular pension circumstances as the rules vary according to the kind of pension you have. Your state pension is not considered part of the bankruptcy estate, but it will be used as income when determining whether you should make monthly payments towards your bankruptcy. If you have a personal pension that has been approved by HM Revenue and Customs, it will not be included as an asset. Even if this is not the case, you may still be able to obtain permission for a personal pension to be excluded. However, if your pension is included as part of the bankruptcy estate, the Official Receiver or trustee is able to claim all or part of it, even after you have been discharged from bankruptcy.
You won’t be able to borrow more than £500 while you’re bankrupt unless you disclose this to the lender. What’s more, you can’t be a company director or set up or manage a company without the court’s permission. Nor can you run a business under another name without telling people you trade with that you are bankrupt.
No, not all debt is written off. There are some exclusions, including debt arising from fraud, child support and alimony, student loans, court fines and personal injury fines.